Content

1. What is the new disengagement agreement in eastern Ladakh?
2. Tender cut

Editorial: What is the new disengagement agreement in eastern Ladakh?

Context:

• India and China finally reaching an agreement on disengagement at Pangong Lake, which has been at the heart of the recent LAC tensions, is a promising start towards restoring peace in the border areas.

Relevance:

GS Paper 2: India and its neighborhood

Mains Questions

1. The success of the new disengagement plan will finally depend on whether it is implemented on the ground in letter and in spirit. In this context, critically examine  an agreement on disengagement at Pangong Lake, between India and China. 15 Marks

Dimensions of the Article:

• What is the new disengagement plan in eastern Ladakh?
• India China Border disputes
• Causes of border disputes between India and China
• Way Forward

What is the new disengagement plan in eastern Ladakh?

According to the statement made by Defense Ministry and the statement issued by the Chinese Defence Ministry a day before, troops from both sides have started disengaging from the Pangong Tso area in eastern Ladakh.

• As of now, the disengagement process seems restricted to the north and south banks of Pangong Tso.
• Sources in the security establishment have mentioned that the process has started with the pulling back of certain columns of tanks from the south bank region by both sides.
• At the moment, there is no pullback of troops from the friction points and the heights they are positioned on. That will happen in a phased and verified manner.

India China Border disputes:

• The border between India and China is not clearly demarcated throughout and there is no mutually agreed Line of Actual Control (LAC).
• The LAC is the demarcation that separates Indian-controlled territory from Chinese-controlled territory. India considers the LAC to be 3,488 km long, while the Chinese consider it to be only around 2,000 km.
• The LAC is divided into three sectors, viz. Western, Middle and Eastern.
• The boundary dispute in the Western Sector (Ladakh) pertains to the Johnson Line proposed by the British in the 1860s that extended up to the Kunlun Mountains and put Aksai Chin in the then princely state of Jammu and Kashmir.
  • India used the Johnson Line and claimed Aksai Chin as its own. China, however, do not recognise it and instead accepts McDonald Line which puts Aksai Chin under its control.
• In the Middle Sector (Himachal Pradesh and Uttarakhand), the dispute is a minor one. Here LAC is the least controversial except for the precise alignment to be followed in the Barahoti plains. India and China have exchanged maps on which they broadly agree.
• The disputed boundary in the Eastern Sector (Arunachal Pradesh and Sikkim) is over the McMahon Line (in Arunachal Pradesh) decided in 1914 in a meeting of Representatives of China, India, and Tibet in Shimla.
  • Though the Chinese representatives at the meeting initiated the agreement, they subsequently refused to accept it.

Causes of border disputes between India and China:

• Infrastructure Development along the LAC: In the past decade, India has worked hard to strengthen its position on the border and its presence along the LAC. E.g. Dalut Beg Oldie (DS-DBO road) in the northern tip of the western sector greatly facilitates the lateral movement of Indian forces along the western sector, reducing travel time by 40%.
• Shadow of Dokalam Episode: In a broader context, current confrontation is also attributed to the 2017 China-India standoff at Doklam.
• Reorganisation of Jammu and Kashmir: China had earlier also protested against the formation of new Union Territory of Ladakh and accused India of trying to transform the LAC unilaterally.
• Global backlash against China for mishandling of COVID-19: India also supported a Resolution at the World Health Assembly demanding a fair probe into the origin of Coronavirus. Also, India has recently took over as the chair of the WHO executive Board.
• Signs of new Chinese aggressiveness: along the Sino-Indian border is one of the elements of China’s new adventures including o the new security law Beijing has enacted to control Hong Kong.
• India’s steps in Indo-Pacific: India’s participation in Quadrilateral Security Dialogue (Quad), with strong maritime component, proposals like Supply Chain Resilient initiative are seen by China as potential antiChinese alliance of democracies aimed at containing it and checking its maritime rise in the Indo-Pacific.

Way Forward:

The success of the new disengagement plan will finally depend on whether it is implemented on the ground in letter and in spirit. The events of last year have left enormous distrust, which remains a hurdle and China’s actions on the ground have not always matched its commitments. Both sides should keep in mind what is at stake for the broader relationship between the two most populous countries, which ultimately hinges on peace on the border.

Editorial: Tender cut

Context:

• The government’s statement about bringing in a law on cryptocurrencies is welcome, as it could put an end to the existing ambiguity over the legality of these currencies in India.

Relevance:

GS Paper 3: Banking Sector (cryptocurrencies)

Mains Questions:

1. Instead of shutting out cryptocurrencies, the government must ensure smart regulation. Discuss. 15 Marks

Dimensions of the Article:

• What is cryptocurrency?
• Significance of cryptocurrencies
• Issues related to cryptocurrencies:
• Way Forward:

What is cryptocurrency?

• A cryptocurrency is a digital or virtual currency (computer generated currency) and is based on the principle of cryptography. It allows transacting parties to remain anonymous while confirming the transaction is valid.
• The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto.
• Bitcoin’s success has spawned a number of competing cryptocurrencies, such as Litecoin, Namecoin and PPCoin.

Significance of cryptocurrencies

• Privacy Protection: The use of pseudonyms conceals the identities, information and details of the parties to the transaction. They are difficult to counterfeit as compared to physical currency.
• Cost-effectiveness: Electronic transactions attract fees and charges, which is on the higher side when the transactions are transnational and undergo currency conversion, or attract processing fee levied by the banks, third party clearing houses or gateways. Cryptocurrencies solve this problem, as they have single valuation globally, and the transaction fee is extremely low, being as low as 1% of the transaction amount. Cryptocurrencies eliminate third party clearing houses or gateways, cutting down the costs and time delay.
• Lower Entry Barriers: Possessing a bank account or a debit/credit card for international usage requires documented proofs for income, address or identification. Cryptocurrencies lower these entry barriers, they are free to join, high on usability and the users do not require any disclosure or proof for income, address or identity.
• Alternative to Banking Systems and Fiat Currencies: Governments have a tight control and regulation over banking systems, international money transfers and their national currencies or monetary policies. Cryptocurrencies offer the user a reliable and secure means of exchange of money outside the direct control of national or private banking systems.
• Open Source Methodology and Public Participation: They have their own consensus based decision making, built-in quality control and self-policing mechanisms for building frameworks, practices, protocols and processes.
• Benefits for customers: The rise of cryptocurrencies offers ordinary people the rare opportunity to choose among multiple currencies in the marketplace. It also may help people gather funds for a cause.

Issues related to cryptocurrencies:

• Security risks: In the entire chain of security, wallets and exchanges are found to be the weakest link, and that is where the cyber attacks are commonly aimed at. Theft of cryptocurrencies from exchanges soared in the first half of this year to three times the level seen for the whole of 2017.
• Uncertain Regulatory Environment: The future and further success of cryptocurrencies depends upon the way regulatory frameworks are devised. Different countries have approached this innovation in different ways, and therefore the regulatory environment remains uncertain.
• Lack of Liquidity and Lower Acceptability: Cryptocurrencies function outside banking systems, beyond the regulations or controls of the regulatory agencies. Although online exchanges facilitate exchange of cryptocurrencies with fiat currencies, but generally, this is restricted to the more popular cryptocurrencies only.
• Price Volatility: Cryptocurrencies are known to be extremely prone to price fluctuations. Cryptocurrencies do not yet have an accepted vulnerability index, which other financial instruments such as fiat currencies and gold have.
• Uncertainty over Consumer Protection and Dispute Settlement Mechanisms: Cryptocurrencies are decentralised, that means, there is no single authority for mediation or dispute redressal. The miners are not responsible for any arbitration of disputes between the parties. The transactions are also irreversible.
• Investor protection: Since cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist.
• Potential use for Illicit Trade and Criminal Activities: Between 2011 and 2013, the value of Bitcoins surged as criminals were purchasing Bitcoins in large volumes. In late 2015 and early 2016, Dutch police unearthed two small groups that indulged in Bitcoin-related money laundering. Cryptocurrencies are also emerging as a new funding stream for terrorist outfits. Islamic State of Iraq and Syria (ISIS) had proposed using Bitcoins to raise funds.
• Potential for Tax Evasion: Cryptocurrencies are not regulated or controlled by governments, making them a lucrative option for tax evasion. Sales made or salaries paid in the form of cryptocurrencies could be used to avoid income tax liability.

Way Forward:

Cryptocurrency exchanges, which have sprung up, are reportedly lobbying with the government to make sure these currencies are regulated rather than banned outright. Smart regulation is preferable, as a ban on something that is based on a technology of distributed ledger cannot be implemented for all practical purposes. Also, some more steps can be taken in this regard:

• Upgrading the technology platforms to be secure against fraud and data leak.
• Setting up some kind of a global oversight to guard against misuse of the new currency by anti-social elements, terrorists and enemy countries.
• Educating the users and greater interface with the tax authorities for introducing these currencies in future.
• Promoting stability in the sector, for eg – IBM is backing a new cryptocurrency pegged to the US dollar, in a partnership with US-based financial services provider which provides stability in this sector.